HUD Proposal Would Align ‘Disparate Impact’ Rule with Court Ruling

The Department of Housing and Urban Development will propose a new standard for bringing “disparate impact” claims under the Fair Housing Act, according to proposal text obtained today by several news outlets. HUD is issuing the proposed rule—which is currently under review by Congress prior to being publicly issued later in August—to conform its 2013 disparate impact rule with the Supreme Court’s 2015 decision in in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, which recognized disparate impact analysis to demonstrate discrimination claims under the FHA but added key limitations to ensure the burden of proof in disparate impact cases is with the plaintiffs.

To do this, HUD is proposing to add five elements that must be included in disparate impact claims under the FHA. Specifically, plaintiffs would be required to plead that a challenged practice is arbitrary, artificial and unnecessary; to allege a “robust causal link” between the challenged policy or practice and the disparate impact; to explain how the challenged policy or practice has a harmful effect on a protected class; to allege that a disparity is significant; and finally, to allege that an injury is directly caused by the challenged policy or practice.

HUD’s proposed rule would also provide three methods for defendants to rebut disparate impact claims, including showing that a challenged policy or practice is required to comply with law, regulation or court order, and that a challenged policy or practice relies on a sound algorithmic model. Comments on the proposal will be due 60 days after it is published in the Federal Register; ABA staff will review the proposal and provide comments to HUD. For more information, or to provide feedback, contact ABA’s Joseph Pigg.